When purchasing Worker’s Compensation Insurance there are two factors that can change your rate, credits and debits. There are credits, which help lower the price you pay, and then there are debits, which bring up the price you pay. There are a few things you need to understand in order to read a quote and declarations page with a little more confidence. This can help you as a business owner more confidently shop for workers’ comp coverage.
DEBITS
There are a few different reasons that you will find a credit and debit on your account. When a debit appears on your statement, the first has to do with whether or not the insurance carrier actually likes the aspect of the business they are writing. In other words, there are policies that carry greater risks for the insurance company. For example, carriers find it safer to cover a clerical worker than a HVAC contractor. One of the ways that a carrier will become more comfortable offering a quote is to add a debit, thus increasing the amount you pay to potential offset losses from injury.
The biggest reason you will see a debit added is due to your businesses claims history. Some companies are better at managing injury and promoting safety. For example, companies with safety programs, return to work programs, and prompt reporting of claims generally have less claims than a company that never focuses on how to keep a safe environment for workers. Having these programs in place can help you obtain credits, which we will discuss shortly. Simply put the more claims you have the more you are going to pay in work comp premium.
Finally, another reason for debits has to do with the industry itself or the carrier that is on your policy. If the carrier is hurting from having to pay out a lot of claims all at once they may try to make up for the increased cost by assigning debits to certain classes of business. The other factor is the insurance industry itself. Depending how long you have been in business you may have been through the cycle of premiums going up and down. Multiple carriers and the amount of claims drive this across the entire workers’ compensation landscape. This is common in a state like Florida after a hurricane hits or in the northeast after a year in which there was a lot of damage from winter storms.
CREDITS
Credits are a discount off your policy. An example might be a 15% credit on a $1000 policy would take the annual premium down to $850. Most carriers can offer up to a 40% discount to qualified policyholders. The key to making sure that your business gets all of the credits it is entitled to is by making sure you have a strong safety program and a clean history of losses.
There are automatic discounts that you can see due to premium size as well. These are called premium credits or discounts. This is generally set up in a tier system, such as $0-$5,000 or $5,000-$10,000 etc.
The best way to get credits is to provide as a detailed description as possible about what your business does, but also give detailed examples of your safety programs. Showing how you go about keeping a safe and injury free work environment can go a long way to help you secure the largest credit for your business.
I hope this helps you understand just a little bit more about the declarations page when you are trying to determine the exact breakdown of your premium. It’s not always about rates